Advertisements
Advertisements
Question
State whether the following statement is true or false. Give reasons for your answer :
X and Y are complementary goods. A fall in the price of Y will result in a rise in the price of X.
Options
True
False
Solution
X and Y are complementary goods. A fall in the price of Y will result in a rise in the price of X.
False, if X and Y are complementary goods, then a fall in the price of good Y will lead to a rise in the demand of good X.
Explanation:
Graphically, the effect of this change can be seen as follows:
Here, Suppose D1D1 and S1S1 are the initial market demand curve and market supply curve, respectively. The initial equilibrium is established at point E1, where the market demand curve and the market supply curve intersect each other. Accordingly, the equilibrium price is OP1 and the equilibrium quantity demanded is Oq1.
Now, as the market demand of good X increases, this shifts the market demand curve parallely rightwards to D2D2 from D1D1, while the market supply curve remains unchanged at S1S1. This implies that at the initial price OP1, there exists excess demand equivalent to (Oq'1 – Oq1) units. This excess demand will increase competition among the buyers and they will now be ready to pay a higher price to acquire more units of good. This will further raise the market price. The rise in the price will continue till it the market price becomes OP2. The new equilibrium is established at point E2, where the new demand curve D2D2 intersects the supply curve S1S1. Observe that at the new equilibrium both market price and quantity demanded are more than the initial equilibrium. The new equilibrium quantity supplied Oq2 and the new equilibrium price is OP2. Hence, an increase in demand with supply remaining constant results in a rise in the equilibrium price as well as the equilibrium quantity.
APPEARS IN
RELATED QUESTIONS
Demand for perishable goods is inelastic.
When does ‘decrease’ in demand take place?
Any statement above demand for a good is considered complete only when the following is/are mentioned in it. ( choose the correct alternative)
a) Price of the good
b) Quantity of good
c) Period of time
d) All of the above
State whether the following statement is TRUE and FALSE
Quantity demanded varies directly with price.
Define or explain the following concept:
Derived demand
Give reason or explain the following statement.
Demand for factors of production is derived demand.
Distinguish between normal goods and inferior goods, with examples
Good X and Good Y are substitute goods. If price of Good X increases, discuss briefly its likely impact on the demand for Good Y.
Choose the correct answer from given options
In the given figure X1Y1 and X2Y2 are Production Possibility Curves in two different periods T1 and T2 respectively for Good X and Good Y. A1 and A2 represent actual outputs and P1 and P2 represent potential outputs respectively in the two times periods.
The change in actual output of Goods X and Y over the two periods would be represented by a movement from __________.
From the set of statements given in Column A and Column B, choose the correct pair of statement:
| Column A | Column B |
| 1. Reduction of pollution | (a) Microeconomics |
| 2. Problems due to unemployment | (b) Microeconomics |
| 3. Shift in the demand curve | (c) Microeconomics |
| 4. Government expenditure on building of roads | (d) Microeconomics |
If the increase in demand is greater than the increase in supply, then equilibrium price will ______
Which of the following is correct?
Identify the market form which has indeterminate demand curve:
Read the following news report and answer the Q.97-Q.100 on the basis of the same:
The quantity of a commodity that a consumer is willing to buy and is able to afford, given the prices of goods and the consumer's tastes and preferences is called demand for the commodity. Whenever one or more of these variables change, the quantity of the good Chosen by the consumer is likely to change as well. The relation between the consumer's optimal choice of the quantity of a good and its price is very important and this relation is called the demand function. Thus, the consumer's demand function for a good gives the amount of the good that the consumer chooses at different levels of its price when the other things remain.
The price elasticity of demand for a good depends on ______ and ______ of the good.
Which of the following is the reason behind the downward slope of demand option?
Read the case study and answer the questions 97 to 100:
The Coca-Cola Company is an American multinational beverage company, with its headquarters in Atlanta, Georgia. The first company that conducted its operation in the soft drink industry was Coca-Cola. It is the world's largest non-alcoholic beverage company serving more than 1.8 billion consumers daily in more than 200 countries. It has a portfolio of more than 3,500 (more than 800 no or low-calorie) products. However, the company is best known for its flagship product Coca-Cola which was originally intended to be a patented medicine invented in 1886 by pharmacist John Smith Pemberton in Columbus, Georgia. The Coca-Cola products can be termed as normal goods and in August 2019 Coca-Cola introduced a new product into the market, that is, zero sugar where the demand has increased for the product in the market.
According to the council of the Australian Food Technology Association and Institute of Food Science and Technology, the Australian nonalcoholic beverages industry has been growing steadily, with a 2.3 percent increase in overall production in the year 2000 which amounts to 2.25 billion liters. However, in the re~ent years, sales of customary carbonated soft drinks have dropped as more and more customers become health conscious and move away from high-calorie sugary drinks. Soft Carbonated drinks. and other alcohol-free beverage manufacturers have also sensed the effects of intensifying competition from private-label soft drink makers. Nevertheless, sales of greater value energy and sports drinks have driven profit generation in the industry.
What has happened to the demand of zero sugar carbonated drinks?
Assertion (A): Demand deposits are not legal tenders.
Reason (R): They are with the bank, so only can be used as a legal tender when cheques are issued for the transfer.
Milk is used for making curd, sweets and chocolates.
What type of demand does milk have? Give a reason.
